Shariah Screening

Confidential and Proprietary to Shariah Capital, Inc. - Copyright 2008

Shariah Capital – Expanding the Universe of Shariah-Compliant Stocks

Shaykh Yusuf Talal DeLorenzo Chief Shariah OfficerShariah Capital, Inc.125 Elm StreetNew Canaan, Connecticut 06840Tel. (203) 972-0331 Fax. (203) 972-0229Email: [email protected] Website: www.shariahcap.com

November 2009


Disclaimer

•The foregoing is the proprietary and confidential information of Shariah Capital, Inc. It may not be reproduced, copied, published, distributed or otherwise utilized without the written consent of Shariah Capital, Inc.

•This presentation neither constitutes an offer to sell nor a solicitation to invest in Shariah Capital or its clients’ products.

•This presentation likewise does not constitute an offer to sell or a solicitation to invest in Shariah Capital or a product of a Shariah Capital client.

•Under no circumstances should this presentation be duplicated or transmitted to anyone.

•No representation or warranty stated or implied is made or given by any person as to the accuracy or completeness of the information contained in this document and no responsibility or liability is accepted for any such information or opinion.

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Shariah Capital’s Screening Methodology

Shariah Capital’s Tests•Shariah Capital has refined the screening criteria for equities and built a software engine that streamlines the process for determining Shariah compliance for publicly-listed companies.

•Before a security can be classified “Shariah compliant,” it must pass two levels of screening. Each level consists of proprietary formulas and associated tests based on criteria established by prominent Shariah scholars.

•The first test, an Industry Test, screens the core businesses of companies for compliance.

•The second test is comprised of a series of three Financial Tests. Companies that generate interest income or incur interest expense below certain benchmarks are classified as compliant.

•These tests incorporate and refine the screens introduced by the Dow Jones Islamic Market Index’s Shariah Board in 1998 and later by FTSE.

•Shariah Capital’s tests have been approved by all 5 Shariah scholars who currently comprise the Dow Jones Shariah Board.

Stock Screening Results

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Company Name Industry Test1 Test2 Test301 Communique Laboratory PASS PASS FAIL PASS1-800-Flowers.com, Inc. PASS FAIL PASS PASS104 Corporation PASS PASS FAIL PASS139 Holdings Limited PASS PASS PASS PASSImage Software, Inc. PASS FAIL FAIL PASSFirst Artist Corporation plc MAYBE FAIL PASS PASSFirst Baking Company, Ltd. PASS FAIL PASS PASSFirst Capital Securities Corp. FAIL -- -- --First Copper Technology Co Ltd. PASS PASS PASS PASS1st Dental Laboratories plc PASS FAIL PASS PASSFirst Derivatives plc PASS PASS FAIL PASSFirst Hotel FAIL -- -- --First Pacific Company Limited PASS PASS FAIL PASSFirst Tractor Company Limited PASS FAIL PASS PASS2 Ergo Group plc PASS PASS FAIL PASS2-Intinity, Inc. PASS FAIL PASS PASS20-20 Technologies Inc. PASS PASS PASS PASS21 Lady Co., Ltd PASS FAIL PASS PASS21st Century Holding Co. FAIL -- -- --24hPoker Holding AB FAIL -- -- --2Entertain AB MAYBE PASS FAIL PASS

Industry Segment GradeGold Ores PASSSilver Ores PASSFerroalloy Ores, Except Vanadium PASSMedical Laboratories PASSDental Laboratories PASSElectric Services PASSGas Transmission And Distribution PASSHogs FAILGeneral Livestock, Nec MAYBESecurity Brokers And Dealers FAILCommodity Contracts Brokers/Dlrs FAILNonresidential Building Operators MAYBEApartment Building Operators PASS


Shariah Capital’s Screening Methodology

Shariah Capital – Chief Shariah Officer•All “maybe” companies are referred to Shariah Capital’s Chief Shariah Officer and internationally-recognized Shariah scholar, Shaykh Yusuf Talal DeLorenzo.

•Shaykh Yusuf is a full-time executive of Shariah Capital and a member of its Board of Directors.

•A full-time Shariah scholar is unique to Shariah Capital. A Shariah scholar is not directly available at other firms that provide Shariah screening solutions.

•Shaykh Yusuf, along with the other scholars that have approved Shariah Capital’s screening process, Sheikh Nizam Yaquby and Dr. Daud Bakar, are members of the Shariah Board of AAOIFI.

•Most often, financial data is incomplete

•The industry sector contains some companies that are haram and others that are not

•Two companies merge into a new company

•A company experiences a temporary inflow of cash (thus generating unacceptable levels of interest income)

Some Companies Initially Are Identified As “Maybe” Because:

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Shariah Capital’s Financial Tests

Financial Test 1 Dow Jones

Total Accts ReceivableMarket Cap

< 45%

Total DebtMarket Cap

< 33%

Cash & EquivalentsMarket Cap

< 33%

Financial Test 2 FTSE

Total Accts ReceivableTotal Assets

< 45%

Total DebtTotal Assets

< 33%

Cash & EquivalentsTotal Assets

< 33%

Financial Test 3 Shariah Capital

Interest Expense & Interest IncomeTotal Revenue

Riba Interest ExpenseTotal Revenue

Riba Interest IncomeTotal Revenue

Shariah Capital’s Tests •DJ and FTSE tests for riba assume that higher debt levels mean higher interest levels. Shariah Capital’s tests for interest are more precise.

•Aggregate Interest (Riba) Expense and Income Test – By measuring interest activity against total revenue, this test determines which companies depend largely on borrowing or interest income to drive their businesses.

•Refined Interest Expense to Total Revenue – The acceptable level of interest expense to total revenue is lower than the previous test and is intended to identify those companies that rely extensively on borrowing to operate their businesses.

Since Interest Expense may not be reported as a line item in all companies’ financial statements, Shariah Capital calculates interest expense by multiplying total debt by a proprietary corporate bond yield formula.

•Refined Interest Income to Total Revenue –Where interest income is a significant percentage of total revenue, a company likely is engaged in a business activity that supports riba. This test disqualifies such companies.

Riba Interest Income is calculated by multiplying total cash and interest-bearing securities by a proprietary formula based on publicly-quoted short-term interest rates.

More precise interest results allow a more efficient yet more stringent determination of compliance – and a more exact but larger Shariah compliant stock universe.

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Over 4,760 companies traded on the major U.S. exchanges are Shariah compliant based on Shariah Capital’s tests vs. approximately 1800 companies that currently comprise Islamic market indexes offering Shariah screening solutions.

More than two-thirds of all publicly traded companies worldwide have been classified as Shariah compliant using Shariah Capital’s screening criteria.

Shariah Capital’sFinancial Test 3

Financial Test 2

Financial Test 1

Shariah Capital Screens: A Significantly Larger Universe of Shariah Compliant Stocks

US Exchange Listed Stocks

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56%

49%

77%


Shariah Capital’s Screens – Endorsed by Fatawa

Fatawa – Shariah’s Intellectual Capital•Fatwa – An Islamic legal opinion

•Shariah Capital has received two fatawain support of its screening process.

•One, a “Fatwa Relating to Financial Screening Software for Shariah Compliance,” endorses the methodology behind our Shariah compliance criteria.

•The second, “Fatwa Relating to Shariah-Compliant Equity Trading Software,” approves the data mining engine developed by Shariah Capital to screen companies faster and more accurately than current methods. It is the first fatwaknown to be issued for computer software.

Fatwa Relating to Financial Screening Software for Shariah Compliance

………

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Shariah Capital’s Expanded Screening Universe

Refining Compliance Criteria

• Corporate Financial Data: Publicly-traded U.S., U.K., and Canadian companies, and increasingly, companies listed on other major international exchanges, must report corporate financial data electronically.

• Data Feeds: Leading data providers (Bloomberg, Reuters, etc.) direct this information through a consolidator, FactSet, where it is processed through our Shariah screens

• Detailed Corporate Information: With the advent of EDGAR and more detailed financial information available for processing, our Shariah scholars were able to refine compliance criteria.

• Expanded Universe of Companies: The compliance criteria used by Shariah Capital is more efficient. As a result, it enhances the accuracy of existing screening criteria with more companies meeting Shariah compliance .

Corporate Electronic Reporting Breakthroughs

Detailed Corporate Financial Data Now Available Electronically

+Data Feeds Direct from Leading

Information Providers +

A Refined Criteria for Shariah Compliance

=An Expanded Universe of

Shariah-Compliant Companies

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Screening for Shariah Compliance

Investment Managers

Shariah Capital

Shariah ScreensSoftware

ShariahSupervisory

Board

Investment managers submit a trading universe of prospective companies for preliminary assessment of their investment strategies

Leading data providers submit latest company financial data for Shariah compliance screening

Monitors all trades and all positions

Ongoing reviews for compliance and annual certification

The Process Shariah Capital’s Screening Process for Client PortfoliosScreen: Review investment strategy or project for initial compliance. Pre-screen projected portfolio holdings using Shariah Capital’s proprietary screening criteria and software. Define pivotal Shariah issues and develop practical solutions for compliance.

•Certify: Engage appropriately-qualified Shariah scholars. In collaboration with the client’s legal counsel, amend relevant fund or project documentation for compliance. Certify initial compliance in the form of a fatwa.

•Supervise: Monitor trades and investment positions in a portfolio. Continually screen and update universe of approved companies eligible for investment consideration. Establish a remedial process for non-compliant trades and determine purification, if necessary. Re-certify compliance annually.

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Shariah Capital’s Screening Universe Segmentation

By the Numbers

• Shariah Capital’s screening software provides screening results for over 40,000 stocks on a worldwide basis.

• Our screening software is flexible. It can accommodate a range of screening criteria and the demands of multiple fund strategies, similar to the requirements of many “socially responsible” funds.

• Note that non-compliant industries, like Finance/Insurance, represent only a small portion of the overall screening universe. A wide range of industry segments remain acceptable under Shariah.

Real Estate

Trans/Warehousing

Utilities

Wholesale/Retail Trade

Other ServicesProfess, Scient & Tech

Svcs

MiningMgt Companies

Manufacturing

Information

Healthcare

Finance/Insurance

EducationConstruction

AgricultureTechnology

Global Stock Universe by Industry Segment

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Screening Leading Hedge Funds in the Industry

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• The Al Safi Trust is a comprehensive Shariah compliant platform comprised of single strategy alternative investment managers that provides Shariah screening and arboon-sale solutions along with prime brokerage, administration and trustee oversight – all within a pre-established Cayman trust framework.

• Shariah Capital, Shariah Advisor to Al Safi, utilizes its Shariah screening methodology to generate a monthly universe of Shariah compliant stocks. Managers select from this universe then manage a separate account at Barclays Prime Brokerage -- the same as they would a conventional portfolio.

• Initial Al Safi hedge fund managers seeded with $50 million each include the prominent hedge fund firms Tocqueville, Lucas, Zweig-DiMenna and BlackRock.

• Dubai Commodities Asset Management (DCAM), a wholly-owned subsidiary of Dubai Multi Commodities Centre Authority (DMCCA), and Shariah Capital have formed a joint venture company, Dubai Shariah Asset Management (DSAM), to develop Shariah compliant, commodity-linked investment products and distribute them under the “DSAM Kauthar” label.

Dubai Shariah Asset Management Company(DSAM)

Cayman Islands

TocquevilleGold Focus

Fund, a subtrust of the

Al Safi Trust

BlackRock GlobalResources &

Mining Fund, asubtrust of the

Al Safi Trust

Al Safi Trust Platform, Cayman-Barclays, Prime Broker and Custodian

-Walkers (Cayman), Trustee-Citco, Administrator

DSAM KautharGold Fund

DSAM KautharEnergy Fund

DSAM KautharNatural Resources

Fund

DSAM KautharGlobal Resources

& Mining Fund

$ Units

Lucas EnergyFund, a subtrust

of the Al Safi Trust

Zweig-DiMenna NaturalResources Fund,a subtrust of the

Al Safi Trust

Documents

Shariah Screening